Germany's Leader and Top CEOs Are Visiting Beijing. They Need China More Than Ever - CNN Business

Germany's leader and top CEOs are visiting Beijing.
They need China more than ever | CNN Business 07.11.22, 22:56
Markets Fear & Greed Index Latest Market News

Biden's stock market record so
DOW 32,827.00 1.31% far is the second worst since
S&P 500 3,806.80 0.96% 61
Jimmy Carter
US consumers borrowed $25
NASDAQ 10,564.52 0.85%
billion more in September
Wall Street Journal: Meta said
to be planning significant
layoUs
Germany’s leader and top CEOs

have arrived in Beijing. They
need China more than ever
Analysis by Michelle Toh and Anna Cooban, CNN Business
Updated 6:28 AM EDT, Fri November 4, 2022
https://edition.cnn.com/2022/11/03/business/germany-china-olaf-scholz-visit-trade/index.html Page 1 of 17
Germany's leader and top CEOs are visiting Beijing. They need China more than ever | CNN Business 07.11.22, 22:56
Video Ad Feedback
Here's what Germany's economy minister proposes for tackling inflation

01:42 - Source: CNNBusiness
See More Videos
Hong Kong/London ( CNN Business

Business)) —
— German Chancellor Olaf Scholz arrived in
China on Friday with a team of top executives, sending a clear message: business
with the world’s second-largest economy must continue.
Scholz met with Chinese leader Xi Jinping at Beijing’s Great Hall of the People after
landing in the capital Friday morning and was received by Premier Li Keqiang in the
afternoon.
Joining Scholz for the whirlwind one-day visit is a delegation of 12 German industry
titans, including the CEOs of Volkswagen (VLKAF), Deutsche Bank (DB), Siemens
(SIEGY) and chemicals giant BASF (BASFY), according to a person familiar with the
matter. They were expected to meet with Chinese companies behind closed doors.
matter. They were expected to meet with Chinese companies behind closed doors.
The group entered China without undergoing a mandatory seven-day hotel

quarantine standard for most arrivals. Images showed hazmat-clad medical workers
greeting Scholz’s jet at Beijing’s Capital International Airport to test the official
delegation for Covid-19 upon their arrival.
During the Friday morning meeting between the two leaders, Xi called for Germany
and China to work together amid a “complex and volatile” international situation, and
said the visit would “enhance mutual understanding and trust, deepen pragmatic
cooperation in various fields and plan for the next phase of Sino-German relations,”
according to a readout from state broadcaster CCTV.
Speaking at a press conference with Premier Li, Scholz said that Germany’s
economic relationship with China had recently become “more difficult” because
Beijing was making access to some of its markets more difficult.
“We are seeing discussions in China tending more towards autonomy and less
economic ties. And these views are ones that need discussing,” Scholz said.
Kay Nietfeld/picture alliance/Getty Images
German Chancellor Olaf Scholz arrives at Beijing Capital International Airport on November 4, 2022.
Scholz’s visit — the first by a G7 leader to China in roughly three years — comes as
Germany slides towards recession. But it has fired up concerns that the interests of
Europe’s biggest economy are still too closely tied to those of Beijing.
Since Moscow’s invasion of Ukraine this year, Germany has been forced to ditch its
long dependence on Russian energy. Beijing has declared its friendship with Moscow
has “no limits,” while China’s relations with the United States are deteriorating.
Now, some in Scholz’s coalition government are growing nervous about Germany’s
ties with China.
The tension was highlighted recently by a fierce debate over a bid by Chinese state
shipping giant Cosco to buy a 35% stake in the operator of one of the four terminals
at the port of Hamburg. Under pressure from some members of the government, the
size of the investment was limited to 24.9%.
The potential deal has raised concerns in Germany that closer ties with China will
leave critical infrastructure exposed to political pressure from Beijing, and
disproportionately benefit Chinese companies.
RELATED ARTICLE
Rocketing energy costs are savaging German industry
But Germany is hardly in a position to rock the boat with Beijing as it grapples with
the challenge of reviving its struggling economy. Its consumers and companies have
borne the brunt of Europe’s energy crisis, and a deep recession is looming.
If the European Union and Germany were to decouple from China, it would lead to
“large GDP losses” for the German economy, Lisandra Flach, director of the ifo
Center for International Economics, told CNN Business.
The Kiel Institute for the World Economy estimates that a major reduction in trade
between the European Union and China would shave 1% off of Germany’s GDP.
! ! !! ! !!! !! ! !! ! ! ! !! !! !! ! ! ! !!!!! ! !! ! !! ! !!! ! !!!

Turnover in Germany's trade with China, calculated as the value of goods imported and exported,
has outpaced that of its other top trading partners since 2016, reaching €245.4 billion ($242 billion)
has outpaced that of its other top trading partners since 2016, reaching €245.4 billion ($242 billion)
last year.
250
200
150
100
50
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Calculated in billion euros.
Source: Destatis
Graphic: Anna Cooban, CNN Business
Germany needs to shore up its export markets as ties with Russia, once its main
supplier of natural gas, continue to unravel.
When it comes to China, Germany won’t want to “lose also this market, this
economic partner,” said Rafal Ulatowski, an assistant professor of political science
and international studies at the University of Warsaw.
“They [will] try to keep these relations as long as it’s possible.”
Pressure on Berlin
As Western countries have imposed swingeing economic sanctions on Russia, China
has publicly maintained its “neutrality” in the war while ramping up its trade with
Moscow.
That has triggered a backlash in Europe, where some companies are already
becoming wary of doing business in China because of its stringent “zero Covid”
restrictions.
RELATED ARTICLE
Inflation isn't going anywhere. Just look at the latest data from Europe
Pressure on Berlin is also mounting over China’s human rights record. In an open
letter Wednesday, a coalition of 70 civil rights groups urged Scholz to “rethink” his
trip to Beijing.
“The invitation of a German trade delegation to join your visit will be viewed as an
indication that Germany is ready to deepen trade and economic links, at the cost of
human rights and international law,” they wrote in the memo, published by the World
Uyghur Congress. Based in Germany, the organization is run by Uyghurs raising
awareness of allegations of genocide in China’s Xinjiang region.
It suggested Berlin was “loosening economic dependence on one authoritarian

power, only to deepen economic dependence on another.”
In an op-ed published in a German newspaper on Wednesday, Scholz said he would

use his visit to “address difficult issues,” including “respect for civil and political
liberties and the rights of ethnic minorities in Xinjiang province.”
A spokesperson for the German government addressed wider criticism last week,
saying at a press conference that it had no intention of “decoupling” from its most
important trading partner.
“[The chancellor] has basically said again and again that he is not a friend of
decoupling, or turning away, from China. But he also says: diversify and minimize
risk,” the spokesperson said.
Last year, China was Germany’s biggest trading partner for the sixth year in a row,
with the value of trade up over 15% from 2020, according to official statistics
Chinese trade with Germany was worth a combined €245 billion ($242 billion) in
2021.
A new flashpoint
Still, the furor surrounding the Hamburg port deal is a reminder of the tradeoffs
Germany has to confront if it wants to maintain close ties with such a vital export
market and supplier.
A spokesperson for Hamburger Hafen und Logistik (HHLA), the company operating
the port terminal, told CNN Business on Thursday that it was still negotiating the deal
with Cosco.
Flach, of the ifo Center for International Economics, said the deal warranted scrutiny
because “there is no reciprocity: Germany cannot invest in Chinese ports, for
instance.”
AudioLive TV
Axel Heimken/AFP/Getty Images
A container ship from Cosco Shipping moored at the Tollerort Container Terminal owned by HHLA, in the harbor of
Hamburg, Germany on Oct. 26.
However, it is easy to overstate the impact of the potential agreement, said

Alexander-Nikolai Sandkamp, assistant professor of economics at the Kiel Institute for
the World Economy.
“We’re not talking about a 25% stake in the Hamburg harbor, or even the operator of
the harbor, but a 25% stake in the operator of a terminal,” he told CNN Business.
Jürgen Matthes, head of global and regional markets at the German Economic
Institute, told CNN Business that critics were no longer simply weighing the business
benefits of Chinese investment in the country.
benefits of Chinese investment in the country.
“Politics and economics have to be looked at together and cannot be taken

separately any longer,” he said. “When geopolitics comes into play, the view of China
has very much declined and become much more negative.”
China’s recent treatment of Lithuania has also deepened concerns that Beijing “does
not hesitate to simply break trade rules,” Matthes added. The small, Eastern
European nation claimed last year that Beijing had erected trade barriers in
retaliation for its support for Taiwan.
China has defended its downgrading of relations with Lithuania, saying it is acting in
response to the European nation undermining its “sovereignty and territorial
integrity.” This year, after a Lithuanian official visited Taiwan, Beijing also announced
sanctions against her and vowed to “suspend all forms of exchange” with her
ministry.
What’s on the table

As the German delegation touched down on Friday, they were faced with another
issue, which has become the single biggest headache for companies across China.
“The biggest challenge for German businesses remains China’s zero-Covid policy,”
said Maximilian Butek of the German Chamber of Commerce in China.
“The restrictions are suffocating economic growth and heavily impact China’s
attractiveness as a destination for foreign direct investment,” he told CNN Business.
CFOTO/Future Publishing/Getty Images
An aerial view of the urban landscape in Shanghai on Sept. 25. The city underwent a months-long Covid lockdown
earlier this year.
He said the broader restrictions were so stifling that some companies had moved
their regional headquarters to other locations, such as Singapore. “Managing the
whole region without being able to travel freely is almost impossible,” he added.
In a brief statement, Volkswagen told CNN Business that its CEO was attending the
trip since “there have been no direct meetings for almost three years” due to the
coronavirus pandemic.
“In view of the completely changed geopolitical and global economic situation, the
trip to Beijing offers the opportunity for a personal exchange of views,” the
automaker said.
End of a golden era?

Despite Beijing’s Covid curbs and geopolitical tensions, Germany has every economic
incentive to stay close to China.
Its dependency on China can be seen across industries. While about 12% of total
imports came from China last year, the country was responsible for 80% of imported
laptops and 70% of mobile phones, Sandkamp said.
The automobile, chemical and electrical industries are also reliant on Chinese trade.
“If we were to stop trading with China, we would run into trouble,” Sandkamp added.
China made up 40% of Volkswagen’s worldwide deliveries in the first three quarters
of this year, and it’s also the top market for other automakers such as Mercedes.
Wariness among some German officials over the country’s closeness with China
Wariness among some German officials over the country’s closeness with China
could filter into a more restrictive trade policy, though economic cooperation is still in
both parties’ interests.
In September, Germany’s economy minister Robert Habeck told Reuters that the
government was working on a new trade policy with China to reduce dependence on
Chinese raw materials, batteries and semiconductors.
RELATED ARTICLE
Chinese officials are 'painfully aware' of economic fallout from lockdowns:
European Chamber President
Unidentified sources also told the news agency that the ministry was weighing new
rules that would make business with China less attractive. The ministry did not
respond to a request for comment from CNN Business.
But “despite all odds and challenges, China remains unrivaled in terms of market size
and market growth opportunities for many German companies,” said Butek, of the
German Chamber.
He predicted that “the large majority will stay committed to the Chinese market and
is expecting to expand their business.”
Companies appear to be toeing that line. Last week, BASF CEO Martin Brudermüller
was quoted in Chinese state media as saying that Germans should “step away from
China-bashing and look at ourselves a bit self-critically.”
“We benefit from China’s policies of widening market access,” he said at a company
event, according to state-run news agency Xinhua, pointing to the construction of a
BASF chemical engineering site in southern China.
— CNN’s Simone McCarthy, Chris Stern, Lauren Kent, Nadine Schmidt, Claudia Otto
and Arnaud Siad contributed to this report.
PAID PARTNER CONTENT
When faced with transformation

will cloud be your silver lining?

Germany's Leader and Top CEOs Are Visiting Beijing. They Need China More Than Ever - CNN Business

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Germany's Leader and Top CEOs Are Visiting Beijing. They Need China More Than Ever - CNN Business

Uploaded by

Copyright:

Available Formats

Germany's leader and top CEOs are visiting Beijing.

Markets Fear & Greed Index Latest Market News

Germany’s leader and top CEOs

Here's what Germany's economy minister proposes for tackling inﬂation

See More Videos

Hong Kong/London ( CNN Business

The group entered China without undergoing a mandatory seven-day hotel

Kay Nietfeld/picture alliance/Getty Images

! ! !! ! !!! !! ! !! ! ! ! !! !! !! ! ! ! !!!!! ! !! ! !! ! !!! ! !!!

Calculated in billion euros.

“They [will] try to keep these relations as long as it’s possible.”

It suggested Berlin was “loosening economic dependence on one authoritarian

In an op-ed published in a German newspaper on Wednesday, Scholz said he would

Axel Heimken/AFP/Getty Images

However, it is easy to overstate the impact of the potential agreement, said

benefits of Chinese investment in the country.

“Politics and economics have to be looked at together and cannot be taken

What’s on the table

CFOTO/Future Publishing/Getty Images

End of a golden era?

PAID PARTNER CONTENT

When faced with transformation

You might also like